Spartan Bioscience Inc. has filed for creditor protection after pausing shipments of its rapid COVID-19 test due to an issue with the product.
The Ottawa-based company said some customers were getting a high level of inconclusive results. That's not a safety issue, but it's seeking protection from creditors while it restructures its operations and refines the test's performance.
Spartan said it's laying off 60 employees, or around 70 per cent of its workforce.
Interim CEO Jennifer Ross-Carriere said the company is committed to its technology, customers and partners.
"Spartan remains committed to our vision of putting our world-leading mobile DNA-testing technology to work in the fight against COVID-19," she wrote in an email.
"We believe Canada needs more innovation in the biosciences sector and we are incredibly proud of our team for quickly designing and manufacturing the only made-in-Canada rapid diagnostic PCR COVID-19 test."
Spartan owes $73 million to creditors, according to a court filing by monitor Ernst & Young. The sum includes $16.4 million to Health Canada, $9.8 million to the Ontario Agency for Health Protection and Promotion, $8.8 million to Business Development Canada and $8.7 million to CHU de Quebec-Universite Laval.
Spartan says it plans to make a proposal under the Bankruptcy and Insolvency Act.
Ross-Carriere said Health Canada's authorization remains in place while Spartan works with the agency to resolve the issue.
Health Canada didn't immediately comment on the issues facing Spartan's test.
The federal government approved in January Spartan's rapid test that provides on-site results within an hour.
Spartan has said that its system provides results to remote communities, industries and settings with limited lab access, helping relieve the burden on overwhelmed health-care facilities.
It originally unveiled a rapid test for COVID-19 in the spring of 2020 but had to voluntarily recall it and perform additional studies after Health Canada expressed some reservations.
At the time, Spartan said Health Canada was concerned about the "efficacy of the proprietary swab'' for the testing product. The new version uses "any nasopharyngeal swab" rather than one of the company's own design, Health Canada said earlier this year, and meets the agency's requirements for both safety and effectiveness.
The Spartan COVID-19 System was developed through clinical evaluation completed in Canada and the U.S., with the University of Ottawa Heart Institute as one of the testing locations.
This report by The Canadian Press was first published April 6, 2021.
Ross Marowits, The Canadian Press